MLPs Poised For 16% Upside In 2013, Wells Fargo Says

By Dimitra DeFotis

Wells Fargo says Master Limited Partnerships could produce some nice returns in 2013 after a year of lackluster performance capped by November’s tax-driven sell-off.

Just in time for the annual Wells Fargo MLP conference today, senior MLP analyst Michael J. Blum and his six-analyst team forecast a median sector total return of 16.2% next year, made up of “a forward yield of approximately 7.8% and capital appreciation of 8.4%.” They forecast distribution growth of 4.9% with continued construction of crude oil and natural gas liquids infrastructure.

The Wells Fargo Securities MLP Index fell 1.6% in November and returned 9.3% so far this year versus 14.9% for the Standard & Poor’s 500 index.

Trends Wells Fargo notes in its missive for the month:

crude oil fundamentals remain strong

natural gas liquids volume and margin, while healthy, could fall year over year

natural gas fundamentals could begin to rebound modestly in 2013

infrastructure buildout in big shales is well known

future upside could come from the Gulf of Mexico, Bakken NGL infrastructure needs, reduced capacity for natural gas pipeline and storage, and conversion of existing pipelines to crude oil service.